Five months after serving an 11 year jail sentence on somewhat bogus charges, in 2012 Martin Armstrong wrote Anatomy of a Debt Crisis, a short essay in which he talks about the state of ancient Rome, their monetary crisis and Caesar’s economic reforms as a response to the nation’s troubles. I’ll give a short review of the points I found interesting in the essay and talk briefly about Armstrong’s views. The most intriguing bits of the essay are the parallel’s between Rome and their previous troubles, and us and our current troubles.
I’ve taken away a number of valuable concepts from my time reading Armstrong’s blog posts and some of his archived work, the most important I think is the presence of cycles in all aspects of life. It’s similar to a belief in fate or destiny and it brings a similar sort of comfort. While the trends can’t be avoided in the big picture, they can be managed, and the individual can always take precautions to guard themselves and their family. In this way it is very different from fate, because you still have control as an individual.
On to cycles: As time ebbs and flows all things seem to repeat themselves in a similar manner as before, for slightly different reasons and with slightly different results, but the mechanics remain constant. For example, civilizations rise and then they fall, virus’s mutate and kill off large swaths of the population then fade into nothing, winter comes then it leaves, ice ages are common cycles on our planet, as are shifts in the magnetic field of the Earth, we even see cycles in fashion. Some of these cycles we can explain the mechanics behind them, some we can’t. The important thing is be open to the possibility that they do exist.
Armstrong subscribes to Pi cycles based on the mathematically constant Pi (3.14) it’s a common theme in nature, physics, and electronics. He bases his forecasts and predictions off this number. I don’t subscribe to his theory about Pi cycles because I don’t have enough first hand evidence that proves they are always true, but I do believe things repeat, and every problem we encounter today has been encountered before, though it comes in an unrecognizable form. On to the review.
Much is written about Julius Caesar, but nearly all it has been about his military victories, not his economic and political reforms that ultimately lead to his assassination. To set the stage we need to picture a Rome that is very different from what we might imagine it was. Rome has been ravaged by wars, they were spending money to put down slave revolts, and they had just had a civil war which threw the country deeper into debt (it had already been heavily indebted) the debt was continuing to balloon. Real estate values crashed by over 50% and creditors that repossessed property due to non-payment of loans were still not satisfied because even after taking the collateral (the house) the creditors were still negative (lost money). Rome had been ruled primarily by an Oligarchical class of land owners, bankers, and politician’s through its Senate.
The Oligarchical class was called Optimates, they ruled using the Senate and aimed to use their political power to safeguard and grow their personal and private interests. Power corrupts, this is not a new concept. Corruption was running rampant in Rome in 70BC. The calendar that had been used was a lunar calendar and since the lunar calendar is not perfectly accurate, priests would have to insert additional days into the calendar to keep it accurate. This soon lead to manipulation because the priests could be bribed to extend the calendar and add additional days with the intent to postpone elections. During some years, entire months were being added to the calendar.
The Optimates were able to use and abuse the complex and overwhelmingly large legal code to avoiding prosecution, when caught they would find other ways to be exonerated. This left them largely immune from any judicial action.
Rome was in a severe trade deficit and hemorrhaging gold.
The gap between rich freemen and poor freemen had grown to the point where the difference between a poor freeman and a slave was insignificant. Farmers (agriculture was 70% of the economy) would refuse to hire freeman because slaves work for just food and a place to sleep. It’s similar to an issue we are struggling with now, “the wealth gap”. It lead to revolts in the past and I see no reason why it will be different in the future.
Believe it or not, Rome had a welfare system of free grain to support households, so in a time before EBT cards it was a very easy system to exploit. Landlords would create fake residences and fake names to collect the free grain and then resell it. This was common problem that had been ongoing for sometime.
This is just a list of some of the notable problems in Rome. The biggest, most important, and most problematic would be the real estate and debt crisis. The Optimates, being the wealthiest class of people were also a majority of the lenders/creditors and were demanding the original value of their loans back. They had also repossessed the homes, but that covered 50% of the value of the loan, them accepting a 50% loss was impossible. So they continued to demand interest payments, and people were crushed under a mountain of debt. A populists movement sweep the nation demanding that their debts be forgiven. Enter Caesar, the leader with a massive populist support.
Caesar lacked strong support in the Senate and the Opitmates thought him dangerous, it was their attempt to strip him of his army that lead to civil war and Caesar’s rise to dictator. Caesar had the support of the populace who expected Caesar to protect them from their debts by offering forgiveness, but Caesar knew this was a perilous road to Marxism and the death of the individual. To declare everyone equal and everyone free of debt would not be his choice. Instead he choose a middle ground, properties were reassessed upon their pre-crash prices, interest payments would still be made, but the payment of the principle disappeared because the house had been repossessed. Once interest was repaid, the debt was cleared.
This forced lenders to take losses of around 30% or less, which was better than 50% they were getting, but it still left many lenders with a disdain for Caesar. I personally find it funny how lenders charge interest on loans to account for the risk, but when the loans fail they always cry foul.
“Caesar was a Popularis. Yet he did not follow their demands blindly and cancel all debts. Neither did he with a wink-and-a-nod keep the corruption going. This man stood between both sides and decreed what was just and correct. He was a statesman, NOT a politician only concerned with his own party objectives right or wrong. Had we followed this lesson that has been obscured by the propaganda of his opponents (Optimates) who were desperate to keep the corruption going, we too would have been in much better shape.”-Martin Armstrong
Caesar’s other reforms hit on all aspects of society and the Optimates, like all people that enjoy the status quo, would fight him every step of the way. He forced farmers to have freemen as 1/3 of their labor, this resulted in a huge drop in the unemployment rate.
Realizing that education and health were vital to a society, he encouraged teachers and doctors to move to the city by offering them Roman citizenship.
He fixed the legal system by condensing the laws to the most important ones, put them in books so everyone could read them. He instituted trial by jury, this prevented a monopoly on the justice system that Optimates had, they would be be tried by a jury of regular freemen and they would not be able to dodge convictions as easily. Optimates fought against this, but to see someone fighting against trial by jury as a right, one can only conclude they must be corrupt.
Caesar solidified and make a permanent calendar that was no long subject to change at the discretion of the priests, the month July is named after him. To remedy the trade deficit, tariffs were added for all luxury goods imported. All foreign manufacturing was taxed also.
My summary: Corruption builds up, then it is washed away. And it’s not pretty process. Just another cycle.
Some other thoughts from the paper are quoted below. All credit to Marin Armstrong. It’s related to economics and what he sees as the solution.
When the state is concerned about what a business pays in bonuses regardless of if they are justified or not, that is embarking upon fascism.
We are headed into fascism where the property remains nominally in the
name of the owner, but the state dictates what you may do with that property, how you will manage the property, and what you shall pay to the state. The state is accomplishing the same experiment of Marx with communism insofar it results in a central control dictated by politicians.
Government is incapable of providing economic growth.
There is no plan to ever pay anything off. We are in a debt spiral from which there is no escape other than default or monetize. We are going to have to think out of the box to save the world as we know it.
Effectively, the elimination of usury laws that protected society and tempered and controlled the financial banking greed in order to raise interest rates going into the peak in 1981 has been a disaster. We need to do the same thing that Caesar did. We need to restore the usury laws at 8% cap for credit cards, immediately reduce all interest, ascribe all previous payment to the debt and retroactively reduce the interest to 8% maximum. These 20-30% rates are insane and feed only the financial industry while suppressing economic growth and consumption of product reducing the capacity of other sectors to grow diminishing job growth.
Banks must be banks, not hybrids of everything under the sun. If you want to be a trader, then be a hedge fund. It is not right that a bank can raise money by deposits, pay for FDIC insurance, use the depositor’s money for trading, keep all profits, share nothing with the depositor, and never reveal what risk is being taken with bank deposits.
…I have argued that we need a single world currency created by a
new central bank that does not control interest rates or individual values of national currencies. Each currency will float as will its interest rates. The new one-world currency is used among nations in international payments. Thus, capital will be able to freely flow we will rise and fall on a international right to vote in the confidence of our political state. But make no mistake about it the only “fixed” so called constant can only be the creation of money based on a constant formula of world GDP. The supply cannot be constant, just the formula.
We must adopt a national policy of indirect taxation. Eliminate all direct
taxes including income tax. Once it matters not who is here for we will all
pay the same, then the illegal alien problem will not matter so much and
perhaps we will not be the next East Berlin. Don’t forget. Putting up walls
and cameras to monitor all the borders, also keeps citizens in.